NEWARK, Calif., Jan. 26, 2015 (GLOBE NEWSWIRE) -- StemCells, Inc. (Nasdaq:STEM), a leading stem cell company developing novel cell-based therapeutics for disorders of the central nervous system, posted today the following Letter to Shareholders from its President and CEO, Martin McGlynn.

January 26, 2015

Dear Fellow Shareholders:

Over the past year, StemCells, Inc. has made substantial progress. We completed enrollment and dosing in our Phase I/II clinical trials in two major indications: spinal cord injury and age-related macular degeneration; we reported interim results from these trials showing encouraging safety and preliminary efficacy for our HuCNS-SC® cells in both; and we transplanted the first patient in our Phase II clinical trial in spinal cord injury. We strengthened our executive management team. We closed on a $20 million transaction with two institutional investors, and we hosted a very well-attended event which confirmed the growing number of institutional investors and analysts following the company.

While our stock price in 2014 was disappointing, we are making undeniable progress. We will continue to focus intently on what we can control: progressing our clinical studies, managing our costs, and executing our strategy in a capital-efficient manner. In this letter, I will share some of my thoughts regarding the real value of STEM and why I believe it is a sound investment; I will recap our recent actions and achievements, and I will update you on our future plans.

Why Invest in STEM: The Long and Short of It

Vaccines against diphtheria, tetanus, anthrax, cholera, plague, typhoid and tuberculosis were not developed until the 1930s – nearly 200 years after Edward Jenner successfully created a smallpox vaccine in 1796. Perhaps this historical timeline puts some perspective on the relatively rapid advances we are witnessing in the development of stem cells as therapeutics.

Our journey began in 2000, when scientists at StemCells, Inc. were able to purify the expandable population of human neural stem cells that became our HuCNS-SC platform technology. When formulated for transplantation, HuCNS-SC cells maintain their stem cell phenotype, self-renew and generate the three types of mature cells comprising the CNS: neurons, astrocytes and oligodendrocytes. HuCNS-SC cells have since been analyzed extensively in pre-clinical studies, both in vitro and in vivo, as a therapeutic candidate to treat a vast number of diseases and disorders of the central nervous system.

Just a few years later, in 2006, our HuCNS-SC cells were surgically transplanted into the brain of a six-year-old child with neuronal ceroid lipofuscinosis (NCL), a rare, fatal disorder of the central nervous system. Since then we have gone on to achieve other significant "firsts" including completion of a very successful trial in Pelizaeus-Merzbacher disease (PMD), another incurable pediatric disorder, and our recent completion of enrollment and dosing in the world's first neural stem cell transplant trials in not just one, but two indications with large patient populations awaiting viable treatments: spinal cord injury (SCI) and dry age-related macular degeneration (AMD).

Now, with Phase II clinical trials commencing in both SCI and AMD, we are closing in on achieving our goal of clinical proof-of-concept in both indications by 2017, making relatively rapid progress in the realm of clinical development. The successes we have already achieved and those anticipated are quite encouraging for investors who take the longer-term view. Even those who may seek a more rapid return have reason to hold fast, for now, as well. We expect that as in the historic progress of most pharmaceutical and therapeutic products, our stock should gain value with each advancing stage of clinical development, moreover driven by the news flow of data over the next three years resulting from our clinical trials in SCI and AMD:

By mid-2015 — final results from our Phase I/II trials

Ongoing from 2015 through 2018 — additional read-outs from the 4-year follow-up studies already underway in our Phase I/II trials, which will continue to provide insight into how our cells may be impacting these conditions over time

In the second half of 2015 — interim data from the first open-label cohort in the Phase II Pathway® Study in cervical spinal cord injury

In the second half of 2016 — a planned interim analysis from the Phase II Pathway study will assess pre-defined success and futility outcomes along with safety events. If neither metric is met or detected, respectively, then the trial will be continued to complete enrollment.

In 2017 — proof-of-concept results from our Phase II trials in both SCI and AMD

It is also important to note that we have been manufacturing our HuCNS-SC cells for clinical trials since 2006, in compliance with current Good Manufacturing Practices (cGMP). We currently have enough product banked and cryopreserved to fulfill the needs of our Phase II clinical trials. We are prepared to scale our processes as needed to meet the requirements of future clinical trials and commercialization.

Investors and Analysts are Taking Notice

The Company's first "Investor and Analyst Day," held in New York City on November 20, 2014, was enthusiastically attended by a standing-room-only crowd. The agenda included a keynote by Company founder Irving Weissman, a stem cells science overview by Executive Vice President of Scientific and Strategic Alliances Ann Tsukamoto, and updates on our clinical programs presented by Vice President of CNS Clinical Research and Chief Medical Officer Stephen Huhn, Vice President of Clinical Development in Ophthalmology Joel Naor, and Principal Investigators Raphael Guzman and Richard Rosen. The program also premiered video segments featuring three patients who have participated in our SCI and AMD clinical trials. I am hopeful that many of you took full advantage of the webcast of this event, but if you have not yet done so, I encourage you to view the archive at: http://www.media-server.com/m/p/m8h3mw5w. In addition, the patient videos can be seen at the following web address: http://www.stemcellsinc.com/News-Events/Video-Library.htm.

Recent Actions: Streamlining Our Business

We are now able to fully concentrate our corporate resources on SCI and AMD, our two lead clinical programs, as a result of two actions completed toward the end of 2014:

The SC Proven® reagents business located in Cambridge, England was sold to Takara Bio.

We also decided to wind down our pre-clinical study in Alzheimer's disease, which had been funded in part by a forgivable loan from the California Institute of Regenerative Medicine (CIRM). We have demonstrated that transplantation of our HuCNS-SC cells into the hippocampus, the area of the brain responsible for learning and memory, increases connectivity between the points of contact (synapses) between neurons an important finding given that clinical disability in humans correlates with synapse loss. The observation that our cells increase synapse density in the hippocampus opens the possibility that HuCNS-SC cells may improve neuronal function in human neurodegenerative disorders in general. However, this finding did not translate into a statistically significant improvement in memory as measured by specific behavioral tasks in the animal models, which was a pre-determined criteria for ongoing funding of this pre-clinical program by CIRM. We will continue to assess the data from this study, which suggests hope for the use of HuCNS-SC cells in the treatment of Alzheimer's disease and other cognitive impairments, as we seek alternative means of funding future work.

The Company is now fully focused on two clinical targets with significant unmet need: chronic spinal cord injury, which is the second leading cause of paralysis in the U.S., and geographic atrophy of age related macular degeneration, the most advanced form of dry AMD, and the leading cause of vision loss in developed countries. There are currently no curative treatments for either of these indications. Our mission is clear: to demonstrate, in well controlled Phase II clinical trials, that our HuCNS-SC cells can restore lost motor function in patients with chronic spinal cord injuries and lead to preservation of visual function in patients who are progressively losing eyesight.

Recent Achievements: Progressing Our Clinical Studies in Two Major Indications

The Company continues to make significant progress toward its twin goals of demonstrating the safety and efficacy of HuCNS-SC cells in spinal cord injury (SCI) and dry age-related macular degeneration (dry AMD).

Spinal Cord Injury: Earlier this month, we announced that we had successfully dosed the first patient in our groundbreaking Pathway Study. This Phase II controlled proof-of-concept study is designed to evaluate the safety and efficacy of our HuCNS-SC cells in cervical spinal cord injury patients.

With twelve patients out to six months and eight out to twelve months post-transplant, we have reported interim data that suggests the first signs of biological and clinical effect post HuCNS-SC transplantation in chronic thoracic spinal cord injury.

Seven patients had sensory gains below the site of injury, detected by measurable improvements involving more than one sensory modality and incorporating multiple thoracic spinal cord segments, changes that are unanticipated at their individual stages of recovery following motor-complete spinal cord injury.

Moreover, there has been a very recent observation of voluntary toe movement in an AIS-B patient one year post transplant and three years post injury, suggestive of restoration of some motor function.

Initial six-month follow-up data on the first cohort showed a reduction in the rate of GA in the study eye versus the control eye, and additional interim data released at the Analyst Day which included five patients with twelve-month follow-up in the first cohort, continues to support the plans for a controlled Phase II study.

An Eye on the Future

Ultimately, we will be judged by our success in achieving our goal of translating our "Groundbreaking Science" into "Breakthrough Medicine." The progress we have seen in our clinical programs, to date, signifies that we are en route to fulfilling the therapeutic promise of human neural stem cells — as a one-time intervention yielding a long-term benefit for millions of patients suffering from the devastating effects of intractable diseases and disorders of the central nervous system. We are confident that our Company's value will come through because our mission, and therein the opportunity, is to realize the potential of stem cell therapy to create new, life-altering treatment paradigms. There is simply too much at stake for the patients and their families who are counting on us to succeed for us to waiver in our commitment to finish what we started in 2006.

On behalf of our employees, as well as the patients and families whose hopes we hold dear, I want to thank you for your continuing support and your faith in our ability to prove our value.

Sincerely,

Martin McGlynn
President and Chief Executive Officer

A copy of the shareholder letter may be found on the StemCells, Inc. website at:

Apart from statements of historical fact, the text of this press release constitutes forward-looking statements within the meaning of the U.S. securities laws, and is subject to the safe harbors created therein. These forward-looking statements speak only as of the date of this news release. The Company does not undertake to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. Such statements reflect management's current views and are based on certain assumptions that may or may not ultimately prove valid. The Company's actual results may vary materially from those contemplated in such forward-looking statements due to risks and uncertainties to which the Company is subject, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 and in its subsequent reports on Forms 10-Q and 8-K.